House votes to repeal 3 percent withholding rule, blunting Obama

The House voted Thursday to repeal the requirement that governments at all levels withhold 3 percent of payments to government contractors.

The vote represents the first time the GOP-majority House has approved a provision of President Obama’s $447 billion jobs package, of which repeal of the 3 percent withholding rule was a relatively small part.

By approving the measure, which most Republicans and Democrats support, the GOP bolstered its argument that while Republicans are passing legislation to help the economy, Obama and Democrats in the Senate have been unable to move jobs legislation. They also provided a good counter-argument to Obama, who has been criss-crossing the country slamming Republicans for obstructing his jobs bill.

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Obama’s jobs package has not been able to proceed in the Senate against unanimous GOP opposition. A few Democrats and independent Sen. Joe Lieberman (Conn.) have also opposed the package, as well as a more narrow jobs bill focused on the hiring of teachers, police and firefighters.

The House voted 405-16 in favor of the withholding repeal bill, H.R. 674. The measure was supported by every voting Republican; all “no” votes came from Democrats.

“By passing another jobs bill, House Republicans are helping companies cope with this era of uncertainty,” House Majority Leader Eric Cantor (R-Va.) said. “This is another bipartisan and commonsense solution to support the small businessmen and women of our economy so that they can support and begin to regenerate our ailing economy.”

Earlier, Cantor also said it was not Republicans but Democrats who were waiting to act on the economy.

“The president has traveled the country telling Americans ‘we can’t wait’ to pass some job bills. Well, we aren’t waiting,” Cantor said. “We continue to pass job bills. Perhaps it’s time for the president to deliver the ‘we can’t wait’ message to the other body in the Capitol.”

The bill repeals a withholding requirement approved by the Republican-controlled Congress in 2006 and signed into law by President George W. Bush that has never been implemented. Both parties have said the rule could end up costing the government more to implement than the tax revenue it would generate, and it has since been delayed several times. The rule is currently scheduled to take effect in 2012.

Contractors support repealing the rule as a way to create more certainty for their businesses, and Cantor took up that argument as a reason to support the bill today.

“The impact of this rule will be huge, accounting burdens on governments and potentially harmful cash flow disruptions for suppliers, contractors and subcontractors,” he said. “Those are dollars … that could otherwise be used to grow a business or hire more workers.”

House Small Business Committee Chairman Sam Graves (R-Mo.) said after the vote that ending the rule is an important step, as further delays only create uncertainty for companies.

“That’s why the full repeal of this tax is needed, once and for all,” he said. “I encourage the Senate to do the right thing and act quickly to pass this bill that will provide more certainty for the thousands of businesses who contract with federal, state and local governments.”

Other Republicans praised the bipartisan support for the bill, which the Obama administration also likes. Democrats speaking in Thursday’s debate said they support the measure, but some said it would do little to create jobs, as Republicans insist.

“Let’s support this bill but not pretend that it will create jobs,” said House Ways and Means Committee ranking Democrat Sandy Levin (Mich.).

Levin added that Moody’s Chief Economist Mark Zandi has described repeal of the rule as a small issue to dispose of, but not one that can be expected to yield significant job creation.

But Rep. Bill Pascrell (D-N.J.) indicated that he believes repeal would create jobs, even as he noted that the rule was approved by Republicans a few years back.

“I opposed the enactment of the 3 percent withholding when a Republican Congress and a Republican administration enacted it, because I knew that it would hurt the economic engines of our economy,” Pascrell said. “The repeal of this requirement will free up small businesses’ cash flow, increasing their ability to add jobs and to bid on new projects.”

Just before members approved the repeal, they approved legislation scaling back eligibility for Medicaid and other healthcare programs. The healthcare bill, H.R. 2576, was seen in the House as the way to pay for the repeal of the withholding requirement.

The Congressional Budget Office said repealing the withholding rule would cost the government $11.2 billion over 10 years. Republicans estimate that changing healthcare eligibility requirements would save the government about $13 billion.